Pet cover has become highly expensive, but is it worth taking the risk and just going without insurance?

With more dogs and cats being bought at Christmas than any other time of year, insurance companies are busy promoting the benefits of pet cover. The market is highly profitable for companies selling the policies, but does this insurance stack up financially for the pet owners?

Zoe Fox certainly thinks so. Her dog, Marley, likes to snack on things he shouldn’t. Usually this means small toys, which don’t cause a problem for the 18-month-old labrador. Unfortunately, one day it was a conker, and that was a problem.

Four days later Marley was being uncontrollably sick. After a scan costing £600, the vet confirmed the conker was stuck in his gut and needed surgical removal. Zoe, 31, a physiotherapist from Batley, West Yorkshire, says: ‘The vet called and said, “We need to talk costs.”

Pain relief: Zoe Fox was glad she didn't have to pay for expensive surgery that Marley needed after eating a conker

‘Luckily, I was able to say that
Marley was insured. The total cost of treatment, which included two days
and nights in the surgery plus follow-up courses of drugs, came to
£2,033.’ Marley has fully recovered.

Zoe’s cover with Direct Line costs
£20 a month and has a £7,000 ‘per condition’ limit. There is an £80
excess. In this instance, because the claim was so large, the insurer
paid the vet direct. Usually, the owner pays the vet and is then
reimbursed.

Zoe, who had insured Marley with
Sainsbury’s until last August when she switched to Direct Line, says:
‘My Direct Line policy comes up for renewal in August and we will see
what happens to the premiums then.

‘But I’ve saved a lot. I have a
friend who cancelled her insurance and instead puts money away each
month into an account. Maybe hers is the right way, but I’m sticking
with insurance for now.’

With policies costing so much, is it worthwhile for pet owners to take out cover?

Most policies work in one of three,
broad ways. ‘Deluxe’ plans offer ‘cover for life’, where each year vet’s
fees are met in full. So animals with ongoing conditions such as
diabetes or eczema are covered year after year.

The second, more common, type of
policy offers cover limited to 12 months for each condition. So for
instance, treatment for a cat with diabetes will be covered for 12
months from diagnosis. After that, no further claims for the condition
can be made under the policy.

A third type of policy restricts
claims per condition to a set amount without time limit. Thereafter, the
condition would not be covered.

More than two million pet owners buy
cover, paying on average £253 a year to insure a dog and £140 for a cat.
These figures reflect the lower cost of the second and third categories
of insurance. ‘Cover for life’ plans can cost three times as much as
the condition-limited versions.

The cost of animal treatment, like
that for humans, is rising faster than general inflation and is
estimated to grow at 12 per cent a year. This is roughly the increase in
average premiums pet owners should expect over time, provided they use a
large and reliable insurer.

Some insurers, particularly
newcomers, may impose sudden premium increases, or pull out of the
market altogether, as Lloyds did last October. But for many owners, the
cost of the insurance is worth it because of the knowledge they will not
immediately have to find hundreds or even thousands of pounds for
emergency treatment.

Charlotte Rudolph lives in Islington,
north London, with her three cats, Gizmo, 6, Louis, 4, and two-year-old
Puds. Charlotte, a photo- graphers’ agent, has insured all three
animals with More Than at £12 a month per cat. The cover has come in
handy because two of the animals have fallen from a window in
Charlotte’s fourth-floor flat.

Louis, who fell when he was only
three months old, was fine, but Gizmo was an adult when in 2009 he
landed on the concrete below.

Charlotte, 32, says: ‘He was
unconscious and I thought he was dead. I tried not to move him much but
carried him to the road where a passer-by drove us to the vet.’ Gizmo
was paralysed down one side for two weeks and needed a variety of
treatment that in the end cost £1,200.

Charlotte’s policies require her to
pay the first £50, plus ten per cent, of all claims. ‘Over time I cannot
say that I have got my money back,’ she says. ‘But I do have peace of
mind. If the animals need treatment, the money’s there.’

When choosing cover it is worth
considering the average costs of treating common injuries and
conditions. Specialist insurer Petplan says the most common canine
claims relate to lameness, costing an average £500.

Arthritis, also common, costs an
average £350 per dog per year while atopy – the most common form of
canine skin allergy that causes extreme itching – costs £600 per claim
per year. Back treatments come in at an average £1,850.

Most cat injuries are the result of
being struck by a vehicle and the average claim is for £1,000. Diabetes
is the most common ongoing condition with claims costing an average of
£650 a year.

In the wars: Alfie with his owner, Karen Patel, Jaden, 7, and Lily, 5

One factor pushing up the costs of
treatment is the emergence of new, often costly, treatment. Alfie, an
eight-year-old springer spaniel, has undergone the kind of therapy many
NHS patients could only dream of.

To treat his weak hips, something
spaniels are prone to, he has undergone six sessions on an underwater
treadmill to help strengthen his muscles. This was covered by insurance
that owner Karen Patel has with Direct Line.

Like Marley, Alfie has also undergone
expensive treatment after eating the wrong things. In his case, half of
a rubber ball had to be removed from his gut – and parts of his gut had
to be taken out as well – in procedures costing several thousand
pounds.

His latest scrape came last summer
while out with Karen, 37, a training officer from Swansea. He gashed a
leg when he fell between the bars of a cattle grid and needed a general
anaesthetic while sutures were applied in a process costing £200.

Karen says: ‘I pay £40 a month to
insure Alfie and that’s gone up from about £18 when he was a puppy. It’s
a lot, but he is a family member. When he needs treatment I take him to
the vet and say he’s insured. That’s that.

‘I would never want to be in a
position where the vet says to me, ‘‘Alfie needs treatment which will
cost so much. Can we go ahead?’’ That would be awful.’

A big helping of premium pie ...

As with all general insurance, it is difficult to see how much money firms make from selling pet cover.

But on average it appears highly
profitable. As of 2010, 2.3 million pets were covered, belonging to
owners whose annual premiums totalled £505million.

The figure for annual claims in 2010
was £338million, suggesting a healthy margin – 33 per cent – retained
by insurers to cover costs and as profit. That margin has grown, albeit
slowly.

In 2007, the earliest year for which
comparable figures are available, £290 million was paid out in claims
while £403million was collected in premiums, giving insurers a 28 per
cent slice of the premium pie.

Not all insurers seem able to get it
right, however. Last October, as Financial Mail revealed, Lloyds told
its 50,000 pet insurance customers they would have to find cover
elsewhere because their business was no longer viable. Existing cover
would apply until the policies lapsed or September 2012, whichever was
sooner.

Many owners whose animals suffer
ongoing conditions such as eczema, arthritis or diabetes, will not be
able to find cover or will have to pay a drastically increased premium.

Uninsured pets could be put down

Harvey Locke,
a vet of 41 years and a former president of the British Veterinary
Association, says: ‘It is always the unexpected costs that cause
problems.

‘Free healthcare on the NHS has made people unaware of the true costs of medical procedures.

‘If an animal is insured, there is no
problem. But if the owner is paying, we have to refer to them at every
stage of the treatment to ask whether it is affordable.

‘If the owner cannot pay, they could apply to an animal charity –– or in the worst cases, the animal is destroyed.’

Harvey, who is a founding partner of a
practice in Stockport, Lancashire, says this can be distressing for
everyone. ‘So insurance helps our job a lot,’ he says.

‘We promote insurance strongly,
although we do not get paid commission. Between 50 per cent and 60 per
cent of our registered cats and dogs are insured, but in other practices
it could be as low as ten per cent.’